Polymarket Goes on Offense
Polymarket filed a federal lawsuit against the Commonwealth of Massachusetts on Monday, initiating a high-stakes constitutional challenge to prevent state regulators from blocking its prediction market platform. The filing, lodged in the U.S. District Court for the District of Massachusetts, argues that the Commodity Futures Trading Commission (CFTC) holds sole jurisdiction over event-based contracts, preempting state-level gambling laws.
The legal strike is a direct response to Massachusetts Attorney General Andrea Joy Campbell’s successful enforcement action against rival platform Kalshi. On Friday, a state judge denied Kalshi’s request to pause a geofencing order, effectively barring Massachusetts residents from trading on the regulated exchange. Polymarket’s suit seeks to secure a federal injunction before similar restrictions can be applied to its own operations.
The “Exclusive Jurisdiction” Defense
Polymarket’s complaint hinges on the Commodity Exchange Act (CEA). The firm contends that its “event contracts”, binary options on future outcomes, are federally regulated swaps. Under the CEA, the CFTC has exclusive authority to regulate swaps, theoretically shielding them from the patchwork of state gaming statutes.
Neal Kumar, Polymarket’s Chief Legal Officer, framed the issue as a battle for market uniformity. Kumar stated on X:
“Congress gave the CFTC, not states, exclusive authority over event contracts. These are national markets with critical questions that must be resolved in federal court.”
Institutional Context: The State-Level Siege
The lawsuit arrives as prediction markets face a coordinated pincer movement from state regulators. Beyond Massachusetts, the Nevada Gaming Control Board filed a civil complaint against Polymarket in January, citing the Massachusetts ruling against Kalshi as precedent. State officials argue these platforms offer unregistered sports betting disguised as financial derivatives.
For market makers and institutional participants, the outcome of this federal case is binary. A Polymarket victory would solidify a national regulatory framework under the CFTC. A loss could fracture liquidity across 50 state lines, forcing platforms to navigate a complex web of local gambling licenses or geo-block significant portions of the U.S. user base.
